By Nabela K M Ahmad
This short paper argues for the legal profession to respond to the demands placed upon it by the Halal Economy, in particular Islamic finance in Scotland. I will introduce the religion of Islam, the definition of the Halal Economy in Scotland, Muslim contribution to the Scottish community, the role of Sharia Governance, and Islamic Financial Contracts. My focus will then be on two examples of Scottish organisations, and a recommendation for a Halal trade fair. Then I will go on to discuss some recent transactions in Scotland, and conclude by articulating my argument further that the institutions need to respond to the Halal economy with a recommendation for consideration of Islamic legal services in Scotland to be highlighted, discussed and developed further.
The Islamic religion and the basis of the Halal economy
The religion of Islam was founded by the Prophethood of Muhammad PBUH, in Saudi Arabia in 610 A C, over 1400 years ago. This new religion held strict monotheism at its core as well as the revelation of the Koran, brought down by the angel Gabriel to the Prophet. The revelation requires obedience towards acts of worship and guidance towards conducting one’s way of life. It rapidly spread through military conquest, pilgrimage, missionaries and lawful trade. The prophet was born into an immensely powerful family known as the Qarash, which still control Saudi Arabia to this day, through the monarchy. The faith established 5 main pillars of Islam, namely As Shada, the testimony to Islam, Pilgrimage to the sacred cities of Mecca and Medina, Zakat, giving regular charity, Fasting, during the month of Ramadan, and As Salah, prayer five times a day. These were regarded as the foundations of the Islamic community, a religious development for mankind, with the ultimate recognition of responsibility through the day of judgement, when each Muslim would be held to account for his lifetime deeds. There are now over 50 countries recognising themselves as Islamic. This includes a sizable population in Europe, 2 million in the UK, approximately 95,000 in Scotland, and 10 million in France, as evidenced by Djibril Ndoyde’s book regarding comparative Islamic services and products in Europe. Overall, there are 1.8 billion Muslims worldwide.
In this regard, it is important to note that according to sharia law, the law of Islamic faith derived from the Koran. Therefore there are actions and deeds that are permissible, that form the basis of the Halal economy, and there are actions and deeds which are impermissible and forbidden. These are known as haram, and included alcohol, pork, interest on transactions, pornography, and intoxicants. This leads us to consider the main halal products of the Islamic economy. In the State of the global Islamic economy report by Thomson Reuters, chapter headings indicate areas such as halal food, Islamic finance, Muslim friendly travel, modest fashion, halal pharmaceuticals, halal cosmetics, halal media and recreation and other more subsidiary areas. These backed with the essential acts of worship constitute the Halal economy, which is worth £32 Billion in the UK and the Islamic finance, which is worth $19 Billion in the UK, especially London.
When the Scottish executive were contacted for further statistical data under the Freedom of Information legislation, they did not have this information. This is a failure on their part, and undermines monitoring of economic growth and the demand for Islamic legal services in Scotland.
Muslims in Scotland
Various Scottish bodies such as the response to the 2011 Census by the Al Waleed Centre  have documented the contribution made by Muslims to the Scottish economy. Early immigrants from Asian countries have tended to focus on self-employment in areas such as shops, restaurants and cash and carries. It is observed that the high proportion of self-employed Muslims demonstrates a high capacity for independence and entrepreneurship.
The 2011 census also noted the high proportion of Muslims from second and third generations actively taking part in the higher educations sector. The report concluded this was indicative of an aspirational population seeking upwards social mobility.
Both groups have Islamic financial needs that they require such as business, business banking, business bank accounts, business savings accounts. Professionals’ needs include, Islamic mortgages, Islamic buy to let mortgages, Islamic pensions, savings and current accounts, insurance and student loans. These demands must be met by the Scottish economy.
The second influx of Islamic immigration had focused on the refugee population. With asylum seekers coming from Islamic countries such as Syria, Palestine, Iraq, Afghanistan and Nigeria they have come to make Scotland their home. A report by Strathclyde University found that asylum seekers in Scotland contributed £40 million in home office support which created nearly 500 jobs and £10 million worth of wages, mostly in Glasgow. Organisations in the charitable sector have also responded to these needs, such as Islamic Relief shops, and Glasgow Central Mosque.
This documents the future growth of the economy as asylum seekers settle as refugees into the Scottish economy and contribute fiscally, with a rich tradition of Halal economic activity. Arguably legal barriers need to be removed to allow them to develop further e.g., recognition of foreign qualifications and skills, and professions such as the NHS refugee doctor scheme, allowing them to practice in Scotland.
The census did not record the economic activity by Muslim women in the charitable sector, and this participation has not been adequately documented. Organisations such as the Al Meezan Centre rely on voluntary participation from women. This centre provides a range of Islamic service provision such as playgroups and educational lessons for children and women. As such, legal responses should involve assistance to establish a charitable organisation such as through it’s charitable company law regulations, registration and ongoing legal administration and advice. Some of this should be provided pro bono, by law firms to respond to the Islamic charitable guidance known as Zakat. According to the Koran, Zakat is raised in a variety of ways, which includes direct donations and pledges of time and expertise.
There is also scope for the Islamic economy to expand in the public sector. Muslims place demands upon the government for Islamic service provision, such as the Al Falah Islamic nursery and primary school located in Govanhill. It receives government funding to provide Islamic school care. Other new areas that can be examined include, an Islamic high school and an Islamic housing association. These contracts will require Islamic legal advice on property purchase, planning permission, funding contracts, employment contracts and other public sector legal advice.
The importance of Sharia governance cannot be underestimated. There are 5 main Islamic Banks in Britain, with another 15 based abroad providing services for Great Britain. These banks are regulated not only by a board of directors but by a Sharia Committee. This committee oversees and scrutinises the banks performance to make sure it is sharia compliant. Examples include Al Rayan bank, which has a sharia board of 3 Islamic scholars. The scholars must have relevant experience and be of high academic repute. These boards check and verify the transactions and products of the relevant bank.
Halal businesses also have sharia advisors such as consultants who advise high net worth client’s businesses as having a halal business plan and operational plan. They also point out to them the best place to make investments. Another service provided is advice on the best sharia complaint services such as finding the best halal suppliers. Some ways in which this could grow is through legal advice in this area, such as specialist Islamic consultancy advice.
This self-regulatory regime that has emerged is controlled by directors of financial institutions and directors of sharia bodies. These are supplemented by industry standard bodies such as the AAOFI.
Types of legal contract
It is important to know the various types of Islamic financial contract/instrument that is available on the market, as the best option will need to be taken when advising a bank or business. These include.
- Ijara: This is a leasing contract. The lease leases the asset form the lessor who pays a predetermined rental to the lessor of the item. The terms of rental and duration of the lease are determined at the start. At the end of the lease the asset transfers ownership to the lessor.
- Mudaraba: This is as profit sharing agreement. This entails a joint venture whereby the profits of the venture are shared due to an agreed predetermined profit share. Usually, one party provided the expertise, and the other party provides the investment.
- Murabaha:This is a contract where the other party to the transaction buys an asset at a higher price than its sale price and sells it back to the other party in instalments at a higher monthly payment to cover their cost and profit. This is purchase and resale of the contract.
- Mushraka:This is a joint venture. The contract sets out the collaboration between the entrepreneur and the investor both sharing the profits or losses of the venture.
- Salaam: Full advance is made to goods to be delivered at a future date. This covers a product that is going to be made in the future and is paid for in advance.
- Qard Hasan:This is an interest free loan given to someone. Usually, the big banks operate this as part of the charity function. Corporate governance identifies the best beneficiaries of these type of loan. Examples are student loans, and small microfinance for small industries such as crafts and arts for refugees. The banks advertise these products as being part of their charitable function, and therefore make no profit. However, the future student is a future customer, and this is a way to retain them.
- Sukuk:These investment certificates are like bonds. The underlying asset is owned by the sukuk holder. Returns are paid to investors in line with their ownership in that asset. Sukuk may be issued by governments or by private companies.
- Takful:This is the equivalent of insurance. A sharia compliant mutual agreement, this is where a group of individuals pay money into fund, and when a claim is made it pays out to the members of the group.
Some examples of support for the Halal economy
Some examples in Scotland that have provided instances of contribution to the Halal economy, will now be outlined. These include the work of Al Rayan bank in Glasgow, The Enterprise project of the Muslim Women’s Resource Centre, and a recommendation for a halal trade fair in Scotland.
Al Rayan bank provides halal Islamic services, and it opened with 2000 clients in Glasgow, across Scotland. The bank provides services to businesses as well as domestic customers. Islamic banking services include; a business savings account, business current account and business loans. They also provide Islamic mortgages, buy to let mortgages, savings and current accounts. They aid clients in areas such as pensions to Islamic wealth management a company that specialises in other Islamic products such as investments.
However, this results in an increase in conveyancing work to be carried out by law firms, and legal issues such as company incorporation, licensing, insurance, employment contracts, obtaining planning permission and other legal services all need to be provided for.
The Muslim Women’s Resource Centre ran an enterprise project which included 10 weeks of free business advice workshops, to help women get into business. These were delivered in Edinburgh, Glasgow, and Dundee and were well attended by a variety of women with business ideas from starting a property development company, and all the way to the idea of a catering company running initially from home. The project attracted many Muslim women who may have faced barriers to business start-up. These barrier were fortunately covered in workshops. Ongoing evaluation and support were offered, and one to one sessions were held to help with business planning or complex enquiries.
Future developments recommended in this area include the launching of an annual halal trade fair and conference in Scotland, with participants including:
- Islamic Banks,
- Law Firms specialising in Islamic Finance,
- Scottish Enterprise,
- Scottish Government Departments support,
- Ambassadors from Islamic countries with high net investment such as Saudi Arabia, Dubai, Bahrain and Qatar,
- The Media, to provide coverage of the issues,
- Individual and institutional investors, including business opportunities such as chicken cottage franchise and charities.
The future of investment in Scotland requires hard work and cross institutional cooperation so that the Scottish economy can rise to the challenge faced by this new wave of investment opportunities. The advent of Brexit means that the UK can now enter into trade treaties and deals with new partners in the Islamic Nations, and Scotland is poised to take advantage of this development.
In terms of knowledge acquisition, it was found that the UK lead the way in courses and events on the Halal economy. One example of this was Dundee university offering a Masters in Islamic banking and finance. Also the CIMA is offering 4 courses in Islamic finance for professional qualifications. However, the Law Society for Scotland does not yet offer courses in Islamic law as part of its continuing professional development programme of courses.
Investing in Scotland
There have been significant legal transactions in Scotland which have boosted the Halal economy. Shepperd and Wedderburn were the first to advise a client on the Islamic mortgage implications, they have also taken part in the publication of Investing in Scotland, a brochure seeking to advise Islamic investors to consider Scotland for halal trade.
CMS advised on the acquisition of 1 Atlantic Quay, in Glasgow by the Bank of London and Middle East, advising on the corporate, banking, real estate and tax aspects of the transaction, to establish a prime office investment extending to 121,737 sq. ft.
They also advised on the financing of a private GCC based acquisition of an £11.5 million logistics hubs in Edinburgh.
A sharia complaint bank was also advised on the acquisition of student accommodation in Edinburgh, a Rolls Royce manufacturing facility in Glasgow and an office property in Aberdeen let to Petrofac Aberdeen asset management which also operates several sharia complaints funds. Another significant transaction is Westhill business park, Aberdeen.
Great Western Retail Park, Glasgow, was acquired by Saudi based Sidra capital a sharia complaint financial services company. It holds a £900m UK portfolio and added to this with the purchase of a large property in Glasgow’s Great Western Retail park.
The Sauchiehall building in Glasgow, was acquired by Saudi Based Arbah capital in a £60 million sharia complaint deal. The building is the prominent shopping centre in Glasgow, known as the ‘Buchanan Galleries’.
These transactions lead us to consider the extent of Islamic investment opportunities in Scotland. Given that the Halal economy attracts finance in various investments there is scope and potential for more growth in the Scottish Economy.
To summarise the issues, demands are being placed upon the economy by businessman, professionals, refugees, the Government, corporate and commercial customers, banks and foreign investors. These are some examples which have been discussed here.
To conclude, legal advice is needed for charities, public Islamic services, family law, family businesses, banks and corporate and commercial investors, succession planning, trusts, mercantile law, start-up businesses regulation of businesses such as licensing applications, tax law, real estate, and other investments. Ongoing professional support to the legal profession in Scotland is required, to be able to meet the demands of a rapidly emerging market for Islamic legal services. These would support the economic base for Islamic finance and the Halal economy in Scotland. How the legal community will further respond to these challenges remains to be seen.
 The author has just completed the Diploma of Professional Legal Practice at Strathclyde University.
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 H. Quilter Pinner and Lin Yan,‘Islamic finance;foreign policy opportunities’ Foreign and commonwealth office <https://www.gov.uk/government/publications/islamic-finance-foreign-policy-opportunities> accessed 13/10/21
 They were questioned on the following; How much tax do Muslims pay in Scotland?, How much is the Halal economy worth in Scotland?, How much is the Islamic finance industry worth in Scotland ?,How many Muslim refugees are there in Scotland?, What government support exists for the Halal economy in Scotland? There reply was that they did not hold data based on religious faith, or the matter was a reserved matter, especially immigration, and they was no specific focussed support for the Halal economy.
 Dr Khadijah Eishayyal, ‘Scottish Muslims in numbers, Scottish Muslim population through the 2011 census’ (the Al Waleed centre, University of Edinburgh) <https://www.ed.ac.uk/files/atoms/files/scottish_muslims_in_numbers_web.pdf> accessed 13/10/21
 Report by Economists at Strathclyde University (Frazer of Allan institute)
 ‘Scottish refugee doctors’ <scheme.www.nes.scot.nhs.uk/our-work/refugee-doctors-programme/>
 Al Falah nursery and primary school <https://www.gfis.org.uk/Providers/View/563> accessed 13/10/21
 Letter written to the Scottish government came with a reply that Muslim’s can organise and involve themselves into Islamic service provision through local education authorities and local council’s areas, as well as the housing association federation.
 The project is now over.
 CMS website articles on Islamic Finance transactions, namely; Islamic finance in Scotland new options, CMS advises ADIB on sharia complaint financing in London and Edinburgh worth in excess of £65 million, CMS advises BLME on Acquisition of landmark Glasgow city office property. Details available at <Cms.law/en/gbr> accessed 13/10/21